HYB25-31
The impact of secondary regulation reserve market cannibalization on the business model of a hybrid wind-battery virtual power plant.
04 HYB25-31
Presented by: Daniel Fernández-Muñoz
Universidad Politécnica de Madrid
Objectives and context
The objective of this work is to analyse the impact of the potential large decrease in the prices of the secondary regulation reserve market when evaluating the economic viability of a hybrid wind-battery virtual power plant participating in the day-ahead energy and secondary regulation reserve markets of the Spanish power system, due to expected increase of Battery Energy Storage Systems (BESS) participating in the secondary regulation reserve market in the near future.
Methods/approach
The software FASBATT TM v0.5 [1] will be used to simulate the self-scheduling of a hybrid wind-battery virtual power plant that participates in the day-ahead energy and secondary regulation reserve markets of the Spanish power system. FASBATT TM v0.5 is a decision support tool for the feasibility analysis of grid-scale BESS projects, which executes an optimization model on a rolling horizon basis (day by day) until the BESS reaches its end-of-life while updating the BESS remaining capacity as a function of the BESS operation on a weekly-basis. Its optimisation model has a variable time horizon depending on the BESS capacity and is formulated as a deterministic mixed-integer linear programming problem. In addition to the features presented in [1], FASBATT TM v0.5 considers calendar ageing similarly to [2] and the above.
A set of historical data of the day-ahead energy and secondary regulation reserve markets will be used as input in FASBATT TM v0.5. In addition, different cannibalisation scenarios of the secondary regulation reserve market will be used as input too. The scenarios will be defined as a function of both the duration and magnitude of price decline.
FASBATT TM v0.5 outputs, among other economic parameters, the annual cash flows and revenue obtained by the hybrid wind-battery virtual power plant in the energy and balancing markets analysed throughout the BESS lifetime. This output will be used to analyse the impact of the cannibalisation of secondary regulation reserve market on the economic feasibility of the investment in the BESS.
Outcomes/Conclusions
As the reduction in the price of the secondary regulation reserve due to the market cannibalisation gets larger, the profitability of the wind-battery hybrid virtual power plant is expected to be lower, and the revenue share of the hybrid power plant across the different markets in which it participates is also expected to change over the lifetime of the BESS. It is also relevant to analyse the impact of such large reduction of prices on the optimal sizing of the BESS and its lifetime.
[1] J. I. Pérez‐Díaz and D. Fernández‐Muñoz, “Software Tool for the Feasility Analysis of Stationary Battery Energy Storage Systems,” in 23rd Wind and Solar Integration Workshop (WIW 2024), 2024, pp. 648–655, doi: 10.1049/icp.2023.2798.
[2] E. Ghanaee, J. I. Pérez-Díaz, D. Fernández-Muñoz, J. Nájera, M. Chazarra, and S. Castaño-Solis, “Optimal Scheduling of a Hybrid Wind–Battery Power Plant in the Day-Ahead and Reserve Markets Considering Battery Degradation Cost,” in 2024 International Conference on Smart Energy Systems and Technologies (SEST), Sep. 2024, pp. 1–6, doi: 10.1109/SEST61601.2024.10694289.
The objective of this work is to analyse the impact of the potential large decrease in the prices of the secondary regulation reserve market when evaluating the economic viability of a hybrid wind-battery virtual power plant participating in the day-ahead energy and secondary regulation reserve markets of the Spanish power system, due to expected increase of Battery Energy Storage Systems (BESS) participating in the secondary regulation reserve market in the near future.
Methods/approach
The software FASBATT TM v0.5 [1] will be used to simulate the self-scheduling of a hybrid wind-battery virtual power plant that participates in the day-ahead energy and secondary regulation reserve markets of the Spanish power system. FASBATT TM v0.5 is a decision support tool for the feasibility analysis of grid-scale BESS projects, which executes an optimization model on a rolling horizon basis (day by day) until the BESS reaches its end-of-life while updating the BESS remaining capacity as a function of the BESS operation on a weekly-basis. Its optimisation model has a variable time horizon depending on the BESS capacity and is formulated as a deterministic mixed-integer linear programming problem. In addition to the features presented in [1], FASBATT TM v0.5 considers calendar ageing similarly to [2] and the above.
A set of historical data of the day-ahead energy and secondary regulation reserve markets will be used as input in FASBATT TM v0.5. In addition, different cannibalisation scenarios of the secondary regulation reserve market will be used as input too. The scenarios will be defined as a function of both the duration and magnitude of price decline.
FASBATT TM v0.5 outputs, among other economic parameters, the annual cash flows and revenue obtained by the hybrid wind-battery virtual power plant in the energy and balancing markets analysed throughout the BESS lifetime. This output will be used to analyse the impact of the cannibalisation of secondary regulation reserve market on the economic feasibility of the investment in the BESS.
Outcomes/Conclusions
As the reduction in the price of the secondary regulation reserve due to the market cannibalisation gets larger, the profitability of the wind-battery hybrid virtual power plant is expected to be lower, and the revenue share of the hybrid power plant across the different markets in which it participates is also expected to change over the lifetime of the BESS. It is also relevant to analyse the impact of such large reduction of prices on the optimal sizing of the BESS and its lifetime.
[1] J. I. Pérez‐Díaz and D. Fernández‐Muñoz, “Software Tool for the Feasility Analysis of Stationary Battery Energy Storage Systems,” in 23rd Wind and Solar Integration Workshop (WIW 2024), 2024, pp. 648–655, doi: 10.1049/icp.2023.2798.
[2] E. Ghanaee, J. I. Pérez-Díaz, D. Fernández-Muñoz, J. Nájera, M. Chazarra, and S. Castaño-Solis, “Optimal Scheduling of a Hybrid Wind–Battery Power Plant in the Day-Ahead and Reserve Markets Considering Battery Degradation Cost,” in 2024 International Conference on Smart Energy Systems and Technologies (SEST), Sep. 2024, pp. 1–6, doi: 10.1109/SEST61601.2024.10694289.